Bad debt deduction requires proof of existence and irrecoverability; factual findings in tax reference cannot be reopened.

A bad debt deduction under the Income-tax Act, 1922 depended on the assessee proving the debt's existence, character, and irrecoverability in the relevant year. In a reference under Section 66, the court was confined to questions of law and would not reappreciate factual findings or admit fresh material to displace the income-tax authorities' conclusion. As the alleged debts were not satisfactorily established and their becoming bad in the relevant year was not proved, the deduction was properly disallowed and the burden of proof remained unmet.

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Issues: Whether the assessee was entitled to deduct the claimed amount as a bad debt in computing profits, and whether the income-tax authorities were bound in law to allow the deduction on the material produced.

Analysis: Under Section 66 of the Income-tax Act, 1922, the Court was concerned only with questions of law and not with reappreciation of facts. A claim to deduction under Section 10(2) of the Income-tax Act, 1922, including a claim that a debt has become bad, had to be proved by the assessee. On the materials placed before the income-tax authorities, the origin, character, and recoverability of the alleged debts were not satisfactorily established, nor was it shown that the debt became bad in the relevant year. The Court also held that it could not receive fresh books or materials to overturn the factual conclusions reached by the Commissioner in a reference under Section 66 of the Income-tax Act, 1922.

Conclusion: The assessee failed to discharge the burden of proof, and the disallowance of the bad debt deduction was justified; the question was answered against the assessee.

Ratio Decidendi: In a reference under Section 66 of the Income-tax Act, 1922, a bad debt deduction is allowable only if the assessee proves both the existence and the irrecoverability of the debt in the relevant year, and the Court will not rework findings of fact or admit fresh evidence to displace the income-tax authorities' conclusion.

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